Remember that fight last year over the debt ceiling limit? Of course, you do. Did you know that the debt limit has absolutely nothing to do with the the size of the deficit?
The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred. While debates surrounding the debt limit may raise awareness about the federal government's current debt trajectory and may also provide Congress with an opportunity to debate the fiscal policy decisions driving that trajectory, the ability to have an immediate effect on debt levels is limited. This is because the debt reflects previously enacted tax and spending policies.
Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market, Feb 22, 2011
In other words, it's similar to what happens when you reach your credit limit on your credit cards. What happens when you only inch close to your credit limits? You spend a lot of time juggling your budget. Perhaps you have, or know somebody who has, paid one credit card with another one, constantly performing a balancing act while you hope things get better and your income increases. What happens when you finally reach your limits, and go over them, or are late with payments? The bank adds additional charges to your balance. It's a never-ending nightmare. It turns out the same sorts of things happen when the government reaches its debt limit.
Delays in raising the debt limit create debt and cash management challenges for the Treasury, and these challenges have been exacerbated in recent years by a large growth in debt. In the past, Treasury has often used extraordinary actions, such as suspending investments or temporarily disinvesting securities held in federal employee retirement funds, to remain under the statutory limit. However, the extraordinary actions available to the Treasury have not kept pace with the growth in borrowing needs. For example, unlike the past, the amount potentially provided by the extraordinary actions for 1 month in fiscal year 2010 was less than the monthly increase in debt subject to the limit for most months of the year. As a result, once debt reaches the limit, Congress will likely have less time than in prior years to debate raising the debt limit before there are disruptions to government programs and services.
Delays Create Debt Management Challenges and Increase Uncertainty in the Treasury Market, Feb 22, 2011
Members of Congress were warned about the consequences of not raising the debt ceiling. If members of Congress didn't take the time to read reports like this explaining that raising the debt limit had nothing to do with the size of the deficit, all they had to do was watch the news to have it explained to them.
Despite the warnings of what would happen to the nation's credit rating, Tea Party Republicans insisted on holding the country hostage. And now we find out from the GAO just how much those fiscal-conservatives cost our country by dragging out the debate on raising the debt limit:
GAO estimated that delays in raising the debt limit in 2011 led to an increase in Treasury’s borrowing costs of about $1.3 billion in fiscal year 2011. However, this does not account for the multiyear effects on increased costs for Treasury securities that will remain outstanding after fiscal year 2011. Further, according to Treasury officials, the increased focus on debt limit-related operations as such delays occurred required more time and Treasury resources and diverted Treasury’s staff away from other important cash and debt management responsibilities.
Analysis of 2011-2012 Actions Taken and Effect of Delayed Increase on Borrowing Costs
And that's not all. Ezra Klein added this little tidbit to the news from the GAO report:
On a related point, the GAO report notes that debt-ceiling uncertainty forced Treasury staffers to work overtime trying to figure out when the United States might hit its absolute borrowing limit and how to juggle resources so as to avoid default. And that meant a lot of paperwork:
[Treasury's staffing department] estimated that managing federal debt when delays in raising the debt limit occurred in 2011 and January 2012 resulted in almost 5,750 hours of work, including over 400 hours of overtime and compensatory time. This included more than 1,200 hours in the weeks prior to the use of extraordinary actions for meetings, preparation of parallel accounts and spreadsheets to use in tracking uninvested principal and interest losses, tests of the accounting system, and training staff.
GAO: Debt ceiling fight cost taxpayers at least $1.3 billion
So, in addition to hurting the U.S. economy in other ways, we now learn that it also cost taxpayers an additional $1.3 Billion. Thank you, Tea Partiers who don't seem to understand or don't care how finance actually works. The also don't seem to mind adding to that debt by spending more than
$100,000 In Taxpayer Money On Personal Cars, either. How much more fiscal conservatism can we handle?
Politco was able to get some comments on the GAO report from lawmakers:
Rep. Sander Levin (D-Mich.), the top Democrat on the tax-writing Ways and Means Committee, noted Monday that House Republicans have again pledged to tie spending cuts to any debt-limit hikes – a call that Democrats have characterized as another round of fiscal brinksmanship.
“The cost of last summer’s recklessness by Republicans only continues to grow, yet they seem eager to do it all over again,” Levin said in a statement. “It is time for Republicans in Congress to end their constant turn toward rigid ideology and begin learning how to govern.”
When asked by reporters for a response on the report, House Majority Whip Kevin McCarthy (R-Calif.) said there needs to be “accountability” on the debt-ceiling issue.
“One thing I found on the debt ceiling, and one of the things that created most of the uncertainty, is the president didn’t want to have any type of debt ceiling discussion in an election year,” McCarthy said Monday. “He was more focused on politics, [it’s] what he’s doing in the tax policy right now as well.”
Debt ceiling battle tab: $1 billion-plus
The next time this happens, I think we should start a Fax Campaign and send thousands of copies of this report from the GAO to each Republican Member of Congress that threatens to hold our government hostage.